Sunday, March 16, 2008

The economic news grows worse by the day, and it is sometimes used as an argument against high speed rail - that we cannot afford such an enormous and expensive project at this time. But in fact, it is precisely because we are facing economic disaster that HSR is such a vital project - the most important this state has considered in the last 50 years (since the creation of the California Aqueduct).

Jerome Guillet is a French investment banker who specializes in alternative energy technologies. More importantly, he also runs the community site European Tribune and is a founder of the Energize America 2020 project, designed to wean America from its fossil fuel addiction and provide for new jobs.

Jerome's basic argument, which I have always shared, is that America made an enormous bet in the 1950s - that it could use oil and the automobile as the basis of the economy, society, and transportation instead of rail and mass transit - and that here in 2008, it is clear that bet has been lost. We spent billions creating an infrastructure based on automobiles, and since 1980 have been using debt to continue our economic dependence on oil. Debt was used to mask stagnant incomes, and while this was less problematic in the 1980s and 1990s, soaring oil prices *and oil dependence* in the 2000s led to massively increased debt loads to make up the difference between incomes and costs.

Some might wonder about the role of the housing bubble - isn't that the cause of our present economic troubles? It is, and it proves the point. The housing bubble was, in essence, a double down on the original gamble - that cheap oil would last indefinitely, allowing housing prices to also rise indefinitely, which in turn justified reckless lending practices. It isn't pointed out often enough that the housing bubble popped just as oil prices climbed above $3/gal in 2006-07.

Now our economy is left with massive debt, incomes that stagnate and are therefore unable to pay the debt - that is, a "crisis of solvency" - and a nation that still relies on oil for its transportation needs. That reliance is going to make it much more difficult to grow the economy - oil is now at $110/bbl with little end in sight, creating costs that ripple and cripple the economy.

Jerome points out the obvious course of action:

Too much debt and not enough income was the problem.

And the solution is simple: stop debt (this is happening on its own anyway). and boost income.

How do you do that when there isn't enough money around?

By creating real activity rather than the money-shuffling kind.

And, as it were, there is a sector that is "real" and has an urgent need for action: infrastructure, and in particular energy-related infrastructure.

A plan that focuses on a few simple things:

* massive public support for energy efficiency refurbishment of existing homes;

* a similarly massive plan to develop smart public transportation, both locally and intercity

That last point includes High Speed Rail. The California High Speed Rail Authority estimated that 450,000 jobs would be created as a result of building the proposed HSR system - a massive economic stimulus that, because it would be based on sustainable, non-oil energy, would not be subject to the same price fluctuations as the state's current oil-based transportation systems of interstate highways and airplanes.

In the 1950s California approved bonds to create the California Aqueduct, which enabled the last fifty years of economic growth in our state. We are at a similar place now, where we need to invest in some massive public works to not only secure our state's future, but to help ameliorate our present economic crisis. HSR is long overdue in California - so let's not waste any more time, and approve the bonds on this November's ballot.

2 comments:

I have been thinking about this point too, that HSR development could help stimulate the California economy. Or, bridge the gap.

However, I think a point should be made about 'when.'

The CHSRA is not ready to begin barrowing $ billions for construction. A few things need to be complete... like additional environmental and engineering work. I'd gues we're 2-3 years away from real construction assuming the CHSRA had the 'go' order.

Their are pros and cons to this. One, no barrowing means no debt payments that will not burden the near term state budgets. Two, no ral construction means employment and investment benefits will not been realized for a few more years.

We probably are a couple of years away from the first starts, but the longer we wait, the further away the beginning of construction would be. Had this vote been taken as planned in 2004, or 2006, we'd likely be seeing construction beginning sometime this year if not already under way.

Also, this recession, as the economists now admit, is likely to be long and deep. Even if we don't get under construction until 2010 or 2011 that will still bring economic stimulus in the near term and provide for economic growth in the long term.

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